Fisheries and Oceans Canada - Quarterly Financial Report for the quarter ended September 30, 2019

1. Introduction

This quarterly financial report has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. The quarterly report should be read in conjunction with the Main Estimates as well as Budget 2018 and Budget 2019.

This quarterly report has not been subject to an external audit or review.

Further details on Fisheries and Oceans Canada's authority, mandate and programs may be found in the Departmental Plan and the Main Estimates (Part II).

1.1 Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes Fisheries and Oceans Canada's spending authorities granted by Parliament and those used by the Department consistent with the 2019-20 Main Estimates, Budget 2019 Measures and the Operating and Capital Budget Carry Forwards. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before moneys can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory spending authority for specific purposes.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

2. Highlights of the Fiscal Quarter and the Fiscal Year-to-Date (YTD) Results

The following section highlights the financial results and provides explanations for the fiscal quarter ended September 30, 2019 as compared to the same period last year.

Highlights of the Fiscal Quarter and the Fiscal Year-to-Date (YTD) Results (thousands of dollars)

  2018-19 Authorities as at September 30, 2018 2019-20 Authorities as at September 30, 2019 Variance in Authorities Expenditures during the quarter ended September 30, 2018 Expenditures during the quarter ended September 30, 2019 Variance in Expenditures
Vote 1 – Net Operating expenditures 1,607,896 1,784,287 176,391 407,444 488,751 81,307
Vote 5 – Capital expenditures 758,087 1,067,886 309,799 645,263 136,103 (509,160)
Vote 10 – Grants and Contributions 208,986 297,946 88,960 27,490 54,757 27,267
Statutory Authorities 139,039 157,201 18,162 34,025 38,920 4,895
Total 2,714,008 3,307,320 593,312 1,114,222 718,531 (395,691)

Statement of Voted and Statutory Authorities

Total budgetary authorities available for use increased in 2019-20 from those in 2018-19 by $593.3 million (or 21.9%). This is the result of an increase in Vote 1 authorities of $176.4 million, an increase in Vote 5 authorities of $309.8 million, an increase in Vote 10 authorities of $89.0 million, and an increase in spending authority for statutory payments of $18.2 million.

Some of the amounts shown in this table represent planned changes to funding profiles, as well as variances due to timing of the authorities granted by Parliament. As such, the negative amounts do not represent cuts to program spending.

Explanation of Changes
(2019-20 compared to 2018-19)
Change (thousands of dollars)
Vote 1 – Net Operating expenditures
Funding profile change to implement an amended Fisheries Act 42,944
Funding profile change to maintain mission-critical services to Canadians (e.g. fisheries management activities and maintenance of the fleet for continued safety and security of Canadian waters) 31,317
Funding profile change for the 2018 Budget measure "Renewing Canada's Network of Small Craft Harbours" 29,546
Funding profile change to operate the newly procured icebreakers for the Canadian Coast Guard 29,423
Incremental change in the Operating Budget Carry Forward 16,554
Funding profile change for fisheries aerial surveillance and enforcement (FASE) program to deliver core aerial surveillance monitoring activities 13,060
Other Departmental Adjustments 13,547
Sub-total Net Operating expenditures 176,391
Vote 5 – Capital expenditures
Funding profile change for the Canadian Coast Guard Fleet 177,203
Incremental change in the Capital Budget Carry Forward 151,287
Funding profile change to maintain mission-critical services to Canadians (e.g. fisheries management activities and maintenance of the fleet for continued safety and security of Canadian waters) 31,559
Funding profile change for the 2018 Budget measure "Renewing Canada's Network of Small Craft Harbours" 25,156
Funding profile change for the upgrade of federal infrastructure assets (24,821)
Funding profile change for the Oceans Protection Plan to improve marine safety and protect Canadaʼs marine environment (38,010)
Other Departmental Adjustments (12,575)
Sub-total Capital expenditures 309,799
Vote 10 – Grants and Contributions
Funding for the establishment of Fisheries Fund Programs 30,833
Funding profile change for various 2018 Budget measures 17,615
Funding profile change to advance reconciliation on Indigenous and treaty rights issues 14,223
Funding profile change to implement an amended Fisheries Act 11,549
Funding profile change for the enhancement and expansion of the Indigenous fisheries program suite 6,791
Other Departmental Adjustments 7,949
Sub-total Grants and Contributions 88,960
Statutory
Sub-total Statutory Authorities 18,162
Total Authorities 593,312

In the second quarter of 2019-20, total budgetary authorities available for use amounted to $3,307.3 million compared to $2,993.2 million reported in the first quarter of 2019-20, which represents an increase of $314.1 million. This is mostly due to the receipt of the Operating and Capital Budget Carry Forwards ($313.4 million).

Authorities Used Analysis

In the second quarter of 2019-20, total budgetary expenditures amounted to $718.5 million compared to $1,114.2 million reported in the same quarter of 2018-19, which represents a decrease of $395.7 million or 36%.

Authorities used in Vote 1, Net Operating expenditures, increased by $81.3 million compared to the same quarter last year representing an increase of approximately 20.0% between the two years. This increase is in large part related to a settlement agreement reached with a First Nation group.

Authorities used in Vote 5, Capital expenditures, decreased by $509.2 million compared to the same quarter last year representing a decrease of approximately 79.0% between the two years. This reduction is primarily due to the acquisition of three medium icebreakers which occurred in 2018-19.

Authorities used in Vote 10, Grants and Contributions expenditures, increased by $27.3 million compared to the same quarter last year representing a 100% increase between the two years. This increase is mainly associated with the Department’s commitment to advance the reconciliation agenda on Indigenous and treaty rights issues, including the provision of fisheries access, vessels and gear, and engagement on fisheries policies.

Statutory authorities increased by $4.9 million compared to the same quarter last year representing an increase of approximately 14.4%. The increase to contributions to employee benefit plans is directly aligned with the growth in salary expenditures.

Statement of Departmental Budgetary Expenditures by Standard Object

The decrease of $395.7 million in total net budgetary expenditures in the second quarter of 2019-20 as compared to the same quarter in 2018-19 is primarily due to the following:

Personnel expenditures increased by a total of $25.8 million in the second quarter of 2019-20 when compared to the same quarter of 2018-19. The increase is in line with additional funding provided to the Department to maintain mission-critical services to Canadians, along with an increase in contributions to employee benefit plans.

Expenditures related to Professional and Special Services increased by a total of $15.9 million in the second quarter of 2019-20 when compared to the same quarter of 2018-19. The increase is mainly associated with architectural services for the Offshore Oceanographic Science Vessel and the Offshore Fisheries Science Vessels Projects, as well as increased spending on the Leasing Towing Vessels project.

Expenditures related to Repair and Maintenance increased by a total of $16.1 million in the second quarter of 2019-20 when compared to the same quarter of 2018-19. This is mainly attributable to an increased number of projects for the renewal of Small Craft Harbours network to align with the Budget 2018 commitments, along with a growth in the Canadian Coast Guard’s National Vessel Refit Program.

Expenditures related to the Acquisition of Land, Buildings and Works increased by a total of $14.4 million in the second quarter of 2019-20 when compared to the same quarter of 2018-19. The increase is primarily associated with capital projects undertaken as part of the renewal of Small Craft Harbours.

Expenditures related to Acquisition of Machinery and Equipment decreased by a total of $538.9 million in the second quarter of 2019-20 when compared to the same quarter of 2018-19. This decrease is mainly due to the acquisition of three medium icebreakers in 2018-19, partially offset by spending in 2019-20 for the improvement of the same three vessels.

Expenditures related to Transfer Payments increased by a total of $26.8 million in the second quarter of 2019-20 when compared to the same quarter of 2018-19. This increase is primarily associated with the Department’s commitment to advance the reconciliation agenda on Indigenous and treaty rights issues, including the provision of fisheries access, vessels and gear, and engagement on fisheries policies.

Expenditures related to Other Subsidies and Payments increased by a total of $40.6 million in the second quarter of 2019-20 when compared to the same quarter of 2018-19. This is largely driven by increased payments to settle claims against the Crown in the second quarter of 2019-20.

3. Risks and Uncertainties

Fisheries and Oceans Canada operates in a dynamic environment that is affected by a number of factors, including: increased northern development; expansion of navigable waters; environmental changes; climate change; severe weather events; demographics; technological advances; changing maritime safety and security demands; and global geopolitical and economic conditions. The Department continues to assess how it conducts its business, provides services and delivers its programs to meet client and stakeholder needs. The Department maintains a Corporate Risk Profile which identifies and assesses high-level risks that could affect the achievement of its objectives and priorities. Additional information regarding the Department’s key risk areas is presented in the 2019-20 Departmental Plan.

Certain risks would have financial impacts should they materialize, for example many factors affecting the timing of transfer payments lie outside the control of the Department and could require funds to be reprofiled to future years. To minimize these impacts, the Department continuously monitors its program funding and expenditures throughout the year.

The Government of Canada implemented a new pay system as part of the Transformation of Pay Administration Initiative in 2016. Given the complexity of our workforce coupled with the nature of our organization, the Department continues to experience a significant number of pay related issues. To mitigate the impact on its employees, Fisheries and Oceans Canada created a pay support team to help employees whose pay has been impacted and to accelerate urgent matters to the Pay Centre. The Department continues to work with employees to recover salary overpayments through repayment plans to ensure no undue hardship on the employee. The Department will continue to work internally and with external stakeholders to resolve these issues.

4. Significant changes in relation to operations, personnel and programs

The following changes in personnel were made during the second quarter:

5. Approval by Senior Officials

Approved by:

Original signed by
_________________________
Tim Sargent, Deputy Minister

Original signed by
_________________________
Jen O’Donoughue,
Chief Financial Officer

Ottawa, Canada
November 27, 2019

Statement of Authorities (unaudited)

(in thousands of dollars)

  Fiscal year 2018-19 Fiscal year 2019-20
Total available for use for the year ending March 31, 2019* Used during the quarter ended September 30, 2018 Year to date used at quarter-end Total available for use for the year ending March 31, 2020* Used during the quarter ended September 30, 2019 Year to date used at quarter-end
Vote 1 – Net Operating expenditures 1,607,896 407,444 731,131 1,784,287 488,751 836,071
Vote 5 – Capital expenditures 758,087 645,263 692,379 1,067,886 136,103 220,728
Vote 10 – Grants and Contributions 208,986 27,490 42,109 297,946 54,757 71,355
Statutory Authorities
Statutory - Contributions to employee benefit plans 138,953 33,948 67,895 157,113 38,898 77,786
Statutory - Minister of Fisheries and Oceans – Salary and motor car allowance 86 22 43 88 22 44
Statutory - Spending of proceeds from the disposal of surplus Crown assets 0 55 55 0 0 0
Statutory – Refunds of amounts credited to revenues in previous years 0 0 11 0 0 1
Total Statutory Authorities 139,039 34,025 68,004 157,201 38,920 77,831
Total Authorities 2,714,008 1,114,222 1,533,623 3,307,320 718,531 1,205,985

*Includes only Authorities available for use and granted by Parliament at quarter-end.

Departmental Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)

  Fiscal year 2018-19 Fiscal year 2019-20
Planned expenditures for the year ending March 31, 2019* Expended during the quarter ended September 30, 2018 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2020* Expended during the quarter ended September 30, 2019 Year to date used at quarter-end
Expenditures:
Personnel 1,048,209 272,266 539,366 1,189,920 298,101 587,230
Transportation and communications 62,880 21,242 39,310 67,843 24,044 42,217
Information 2,253 533 1,030 2,417 403 892
Professional and special services 313,523 75,870 115,719 373,804 91,780 149,488
Rentals 17,726 8,612 13,039 19,827 6,991 13,480
Repair and maintenance 220,496 22,709 43,957 213,468 38,797 62,643
Utilities, materials and supplies 114,511 29,705 47,735 109,364 32,273 51,175
Acquisition of land, buildings and works 219,948 23,588 34,047 301,769 37,978 54,511
Acquisition of machinery and equipment 522,254 594,349 616,195 737,927 55,443 93,173
Transfer payments 208,986 27,490 42,109 297,946 54,257 70,855
Other subsidies and payments 22,223 47,589 60,733 33,046 88,148 102,070
Total gross budgetary expenditures 2,753,009 1,123,953 1,553,240 3,347,331 728,215 1,227,734
Less Revenues netted against expenditures:
Sales of goods and services 39,001 9,731 19,617 40,011 9,684 21,749
Total Revenues netted against expenditures 39,001 9,731 19,617 40,011 9,684 21,749
Total net budgetary expenditures 2,714,008 1,114,222 1,533,623 3,307,320 718,531 1,205,985

* Includes only Authorities available for use and granted by Parliament at quarter-end.